CHICAGO, Aug 27 (Reuters) - U.S. soybean futures retreated on Tuesday on improving crop prospects and a lack of progress in trade talks with China, the world's top importer of the oilseed, traders said.

Prices took a hit after soybeans climbed on Monday on short covering and hopes for easing tensions in the trade war between Washington and Beijing.

After the close of trading on Monday, the U.S. Department of Agriculture (USDA) increased its good-to-excellent rating for the nation's soybean crop by 2 percentage points to 55%, topping analysts' estimates for 54%. Ratings climbed by 10 percentage points to 50% good to excellent in Illinois and by 4 percentage points to 48% in Missouri.

The USDA also raised its corn rating by 1 percentage point to 57%, matching expectations.

Traders and farmers remain uncertain about the size of the upcoming soybean and corn harvests after historic rains and flooding delayed plantings this spring.

Only 79% of U.S. soybeans had set pods by Aug. 25, breaking the modern-era record for that date of 80%, set in 1996, according to the USDA.

Soybean traders are also watching the trade war because China is the world's biggest importer of the oilseed. China bought $12 billion a year worth of U.S. soybeans prior to the dispute but slashed purchases as tensions escalated last year.

China's foreign ministry reiterated on Tuesday that it had not heard of any recent telephone call between the United States and China on trade, after U.S. Treasury Secretary Steven Mnuchin said there had been contact between the two sides.

"The U.S.-China trade war has faded as a factor today with the market wanting to see evidence of more concrete progress rather than general comments from the leaders," said Matt Ammermann, commodity risk manager with INTL FCStone.

Egypt, the world's largest wheat buyer, said it had bought 350,000 tonnes of Russian, Ukrainian and French wheat in a tender. No U.S. wheat was offered. (Reporting by Tom Polansek in Chicago Additional reporting by Michael Hogan in Hamburg and Naveen Thukral in Singapore Editing by David Evans, Matthew Lewis and Sandra Maler)